We are delighted to announce today our very first guest blog post from Jake Willott, a smart business owner who wanted to contribute to the Being Smarter community… Take it away Jake.
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Mark-up and Gross Margin are two different beasts
A clear understanding and application of the two within your pricing model will have a drastic impact on the bottom line.
Mark-up is the percentage difference between the actual cost and the selling price
£90 x 25% = £112.25
Gross margin (or gross margin) is the percentage difference between the selling price and the profit. Profit/Sales Price.
£22.50/£112.50 = 20%
These two definitions are extremely important because gross margin directly tells us how many of our £’s from sales are profit.
It is easy to make the mistake in thinking that if a product is marked up by 25%, the result will be a 25% gross margin on the income statement. However, a 25% mark-up rate produces a gross margin percentage of only 20%. By targeting the gross margin percentage vs the mark-up percentage, businesses in general can add an additional 5% profit to the bottom line.
A worked example:
If you increased the selling price of a product by 5% the figures then look like:
Buy at £90 sell at £120. £30 profit (or 25% gross margin)
Increase sale price by 5%. £120 x 1.05 = £126
The cost to us remains the same so the gross profit is now £36 and gross margin is 28.5%.
So the gross margin has gone up by 3.5%, which as a percentage of the starting 25% is an increase of 14%
So for a 5% increase on the selling price we’ve gained a 14% increase in gross margin.
Even better, let’s look at the cash profit. You were making £30 on the sale, now you’re making £36 – an extra £6. As a proportion of our initial £30, that’s a 20% increase.
A 20% increase in cash for a 5% increase in sale price.
The reason this happens (if you’re still here) is that any improvement in gross margin % is multiplied by the turnover.
In summary:
Figure out who your most profitable customers are, and we can only know that if we measure using the correct metrics.
And a small change in selling price has a large effect on increasing profit.
Jake Willott is the MD of Computer Medicine
The computer people who come to you
www.computermedicine.co.uk
Stop getting distracted!
in Get organisedIt’s so easy to become distracted from your working day with the browser constantly open and the Internet always available to you. Leaving your Outlook client on all day is another massive distraction too – which is another story. Turn that off straight away!
If you are looking for ways to be smarter when it comes to putting some focus on your day, Read it Later could be a handy little application for you to know about. In short, it stops you from becoming distracted from what you were doing, without losing a piece of useful information, which could just disappear into the ether.
Read it later is a simple, free application, which has just had its second birthday and comes in three flavo(u)rs – Firefox, Iphone, or any other browser. You are surfing away – trying hard to meet a deadline, and of course you become distracted by an unrelated blog post or other snippet of information that suddenly takes you completely away from what you were trying to achieve originally.
Get into the habit of clicking the Read it later button, which installs into your browser… stop being distracted! What will then happen is that Read it later will file away the URL you were just going to look at for easy access later. You can continue to focus on what you were doing – safe in the knowledge that during you allotted ‘follow up’ or ‘spare’ time even – you can go back and examine the link…
Reading your filed away URLS…
If using Firefox, you can click on the ReadItLater dropdown on the right of Firefox’s search box to expand the list of items you’ve added. ReadItLater conveniently sorts the links by oldest added (you can change this), so you see the stuff that’s been hanging out there the longest at the top. You can quickly filter the list by tag, page name, site, or URL, too.
One of the really cool features of ReadItLater is that it automatically saves links to your Firefox bookmarks in a folder you specify. So if you’re already syncing your bookmarks across computers, your reading list goes to other computers.
In addition – at Being Smarter, we send the list to an RSS feed, which we can then view in Google Reader when time allows.
This is an excellent recommendation for business people serious about putting more focus into the day. It’s a great habit to get into reaching for that Read it Later button…
Demo for you below if you like the sound of it… watch it and then go and be more focused… like its million other users!
http://readitlaterlist.com
Do social networking applications have ANY place in business?
in Get organisedWe are pleased to announce our second guest blogger signing to the Being Smarter blog – from a CEO who’s company is all about helping businesses to become smarter. Aaron McCormack is the CEO BT Conferencing and will be joining us regularly with his thoughts on being smarter in business.
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So who gives a @$£%@ about the Tweeting and Blogging and Facebook updates of anyone, when we all have jobs to get done? I was much quicker to adopt social networking tools in my personal life. Although many Facebook friends are now professional contacts and it is hard to tell the difference nowadays.
Even Twitter (the “domain of twits” I used to say) has recently become an entertaining place for me (@aaronirish) following the updates from all the various riders in the Tour de France (#tdf)
There is a view that companies enabling social networks for internal use will simply end up helping their people spend more hours gossiping and sharing pictures online, rather than helping people get things delivered.
I tend to agree.
Many of my colleagues disagree. They think that corporate social networking tools (those we know, and some that are yet to be invented) will be the way that people do business going forward. People point to the way that these tools help folks build stronger relationships, find the right resources, enhance knowledge management and gain wider perspectives. Books like the Wisdom of Crowds tell us that if we can find a way of sourcing everyone’s input in a group, then the group makes better decisions.
Because you are here reading this blog, you are more likely to believe that social networking tools are useful. But would you bet your own money on it?
Let us know what you think…
Aaron McCormack is CEO of BT conferencing http://www.conferencing.bt.com/ a division of BT Group plc, one of the world’s leading providers of telecommunications services. For over 20 years, BT Conferencing has specialised in the delivery of robust, reliable and innovative conferencing solutions – backed up by high quality service and support.
How to really measure how profitable you are
in Get organisedWe are delighted to announce today our very first guest blog post from Jake Willott, a smart business owner who wanted to contribute to the Being Smarter community… Take it away Jake.
__________________________
Mark-up and Gross Margin are two different beasts
A clear understanding and application of the two within your pricing model will have a drastic impact on the bottom line.
Mark-up is the percentage difference between the actual cost and the selling price
Gross margin (or gross margin) is the percentage difference between the selling price and the profit. Profit/Sales Price.
These two definitions are extremely important because gross margin directly tells us how many of our £’s from sales are profit.
It is easy to make the mistake in thinking that if a product is marked up by 25%, the result will be a 25% gross margin on the income statement. However, a 25% mark-up rate produces a gross margin percentage of only 20%. By targeting the gross margin percentage vs the mark-up percentage, businesses in general can add an additional 5% profit to the bottom line.
A worked example:
If you increased the selling price of a product by 5% the figures then look like:
Buy at £90 sell at £120. £30 profit (or 25% gross margin)
Increase sale price by 5%. £120 x 1.05 = £126
The cost to us remains the same so the gross profit is now £36 and gross margin is 28.5%.
So the gross margin has gone up by 3.5%, which as a percentage of the starting 25% is an increase of 14%
So for a 5% increase on the selling price we’ve gained a 14% increase in gross margin.
Even better, let’s look at the cash profit. You were making £30 on the sale, now you’re making £36 – an extra £6. As a proportion of our initial £30, that’s a 20% increase.
A 20% increase in cash for a 5% increase in sale price.
The reason this happens (if you’re still here) is that any improvement in gross margin % is multiplied by the turnover.
In summary:
Figure out who your most profitable customers are, and we can only know that if we measure using the correct metrics.
And a small change in selling price has a large effect on increasing profit.
Jake Willott is the MD of Computer Medicine
The computer people who come to you
www.computermedicine.co.uk
Personnel Today features The 8.45 Club
in Being Smarter newsIt’s always a good feeling when the industry trade press feature one of your innovations. Lesley Everett’s Walking Tall personal branding course has been featured today in PersonnelToday.com.
One of our esteemed partners and a true expert in her field, Lesley Everett commented…
Lesley is one of a number of partners The 8.45 Club works with to develop courses for business audiences. If you are a true subject matter expert with a story to tell and an audience who wants to hear it – why not consider using this virtual presenter format as a way of reaching untapped audiences as well as generating an additional source of income… while you sleep.
Use the contact us link at the top of the page to request a call.
25 million meetings take place in the US per day. Make your one count.
in Get organisedIf in doubt, call a meeting – that’s right isn’t it? Over 25 million meetings take place in corporate America daily. I suspect there is a proportional number in the UK too. Almost certainly half of that time is wasted.
According to a 2007 Microsoft survey, the average time a worker spends in meetings each week around the world is 5.6 hours and 69% claim these meetings are unproductive. Were you interviewed? because I bet you are in the same boat.
How many hours do you spend a week attending meetings? Is there a better way – would a phone call suffice? Would a quick chat over coffee get the job done? It’s always worth considering.
There are always times however, when it is absolutely necessary to have a meeting whether it’s to get a decision made or to review a business case. Want to know how to run a successful meeting? Then there’s some tips below and watch out for a post on ice-breakers coming soon.
1) Know when and when not to call one
2) Get inspired before you start
3) Preparation is key
4) Focus on three areas beforehand:
5) Rules for chairing
7) Don’t let these things happen
(8) Action points – the whole point of a meeting
Student Gems review
in Get organisedWe first came across Studentgems.com courtesy of The Pitch – an excellent competition run by Sift Media in a Dragon’s Den style. Thanks to their comprehensive Twitter coverage we took a look at their site and what they had to offer – and it’s absolutely on the money as a broker between students, keen to learn and gain experience, and small and big business, keen to keep costs low and have a flexible labour force.
Win-win is always a good starting point for any business and they certainly achieve that alongside great PR coverage on The Guardian, BBC and Observer websites.
In a nutshell, if you are a business looking for specific local skills, you register on the site and advertise those skills. If you are a student with those skills, and have registered, the site will do the brokering – you search or people find you, negotiate a fee and the site takes a small subscription fee.
Joanna Ward is the founder of the site and can be followed here on Twitter.
Think flexible – think creative – do you really need another full time person, or would a relatively cheap flexible resource be a better approach? Studentgems may be the answer for you.
The debate on whether you give away information without registration continues
in Get noticed - marketing tips, Get tech savvyOne of my favourite authors, David Meerman Scott set this debate up in his book The New Rules of Marketing and PR a couple of years ago – and it continues.
The internet marketing ‘guru’s’ – you know, the guys who earn the big bucks with the giant mailing lists make a living out of capturing email addresses, however there is a growing school of thought that in ‘normal’ businesses – particularly in the B2B space that it’s a bad thing to insist on capturing addresses.
There’s a great post today from Michele Linn backing up David’s theory with three ‘aha’ moments – a thing we like here at Being Smarter.
Check out her post and see what you think.
10 great Ashes facts for the pub tonight
in Get organisedDid you know…
1) In the 4th Test in Sydney in the 1882/83 Ashes series, the captains agreed to play on separate pitches. This was the only occasion this has happened in the history in the Ashes. Australia won this match by 4 wickets.
2) Ian Johnson, Australian captain tried to get the umpires to suspend play because of the sawdust on the damp pitch which blew into his eyes while he batted (bless)? Jim Laker went on to pulverise the Australians by getting 19-90.
3) The 3rd test in 1970/71 was completely washed out by the British summer however the toss was completed and won by England and so the Test was deemed to have commenced…
4) Sir Don Bradman’s batting average in Ashes tests was 89.79… not bad huh? Sir Don scored 5028 runs with 12 fifties and 19 hundreds with a highest score of 334.
5) England have not won an Ashes Test at Lords since 1934.
6) The teams have played 64 Ashes series. Australia have won 31, England 28 and five have been drawn. Overall in 317 tests, Australia have won 131, England 97 and 89 have been drawn.
7) The words on the original Ashes cup reads as follows :
When Ivo goes back with the urn, the urn;
Studds, Steel, Read and Tylecote return, return;
The welkin will ring loud,
The great crowd will feel proud,
Seeing Barlow and Bates with the urn, the urn;
And the rest coming home with the urn.
Short of words in 1882 me thinks.
8 The highest innings score by Australia in an Ashes series is 729 for 6 declared at Lords in 1930, while their second best test innings total against England is 701 at the Oval.
9) For England, Sir Leonard Hutton’s 364 helped them reach 903 for 7 declared (the 2nd highest Innings score by any country) at the Oval, and the test victory by an innings and 578 runs – the biggest test win margin for any country against anyone.
10) Shane Warne, is the highest wicket taker in an Ashes series. Warne has 172 wickets from 31 Ashes matches at an average of 22.30.
Why not add one below?
Business letter samples – the place to go!
in Get organisedBusiness in a Box is still one of the best places to go for the best business letter samples and legal documents. If you’ve not heard of it, take a look at some of the dozens of documents that they offer – you can download the application and view all of the document for free.
They have put in some really clever protection software – as despite the fact that their application integrates beautifully into Word, they’ve disabled the copy / paste / drag functionality – so you have to buy the app to actually use any of the words.
(I wouldn’t recommend rekeying them either!)
Check out what they have to offer here…
Twenga – price comparison for Europe
in Get organised(European readers only)
I suspect you may already have a favourite price comparison site, however it’s not good to rest on your laurels – there are new sites coming online all the time and this one is definitely worth a look.
As well as looking for the best deals in UK stores, you can now compare thousands of product prices from retailers in Europe as well as the UK.
By spreading the net wider and converting foreign prices automatically, the site greatly increases the chances of finding a bargain for your business.
You can check it out here.